Moody’s fears second Stockton bankruptcy

Moody’s Investors Services, the bond rating house we heard so much from during Stockton’s fiscal crisis, warned Thursday that Stockton could go bankrupt — again — if it doesn’t reduce pensions.

Readers of this blog are on top of this concern. Stockton officials say their fiscal recovery model anticipated both of CalPERS’ recent rate increases.

Not so in Vallejo. CalPERS bullied Vallejo out of trimming pensions, and the city is sliding toward insolvency again. I imagine the folks at CalPERS must be mighty proud of themselves.

Of course, Stockton’s fiscal health is not solely determined by its pension obligations. The city projected employee costs would rise at 2 percent in the years to come. If leaders exercise fiscal discipline, that is how it will be.

But they also projected employee health care costs will rise at only 2 percent. That may be the city’s Achille’s heel. Underestimating future health care costs is one of the blunders of Dwane Milnes, city manager 1991-2001. It would be ironic if Bob Deis, the city manager who identified Milnes a primary culprit in Stockton’s fiscal mismanagement, made the same mistake.

We’ll know come budget time. The city budget will show how much the city spent on health care, and whether the city’s recovery is being compromised.

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    Michael Fitzgerald

    Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full
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